This morning, a Senate subcommittee is holding a hearing on “Offshore Profit Shifting and the U.S. Tax Code,” which will include testimony from Apple CEO Tim Cook, as well as Apple’s CFO and Head of Tax Operations.
You might ask why Apple is the subject of this congressional scrutiny; after all, Apple did pay about $6 billion in taxes in the U.S. last year on its American operations, which is more than some major corporations that managed to avoid paying any federal income tax at all. But as Senator John McCain observed, while “Apple claims to be the largest U.S. corporate taxpayer… by sheer size and scale, it is also among America’s largest tax avoiders.”
Specifically, a new report from congressional investigators concludes that Apple used a web of offshore tax shelters to avoid paying billions in taxes to the United States and other countries. The investigators found that Apple’s tax avoidance strategies shielded at least $74 billion from the Internal Revenue Service between 2009 and 2012. By officially locating subsidiaries in places like Ireland while managing them from company headquarters in California, Apple was able to, in effect, make the subsidiaries “stateless” — so they were exempt from taxes anywhere in the world. In its own analysis of Apple’s financial reports, Citizens for Tax Justice found that “Apple has paid almost no income taxes to any country on its $102 billion in offshore cash holdings.”
Pretty sneaky, right? But that doesn’t mean it’s illegal. The U.S. tax code makes it awfully easy for Apple and other giant corporations to avoid paying taxes. For example, thanks to a policy known as “deferral,” it is perfectly legal for companies to delay paying taxes on profits made overseas, which means corporations get more favorable tax treatment if they ship jobs and profits offshore than if they invest at home. As Apple’s case makes clear, these unfair tax breaks cost the federal government billions of dollars each year. And those dollars could be used to strengthen our economy and support programs that help women and their families.
For example, just ending deferral would raise about $60.6 billion in a year — more than the federal government spends annually on Head Start, child care assistance, school meals, and education for disadvantaged children combined:
With programs that low-income women and families depend on — like Head Start, child care, and housing assistance — facing deeper sequestration cuts every day, it’s appalling to continue tax giveaways to the rich and powerful. It’s time for tax reform that makes Apple and other profitable corporations pay their fair share.